Tue, Oct 11, 2016 page8

• Economics of Chinese tour groups

  • By Tsai Hung-jeng 蔡宏政
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  Chinese tourists’ activities in Taiwan give rise to two interconnected questions. First: Do these tourists bring benefits to Taiwan’s economy? Second: Will Chinese tourism allow Beijing to develop business connections in Taiwan and use them to put pressure on politicians and the government?

  Taiwan’s point of view is that it hopes to gain economic benefits without causing political and social conflicts. China’s point of view, on the other hand, is that it wants to pay the lowest possible economic price to gain the greatest possible political leverage, and to achieve social integration based on the idea that “both sides of the Taiwan Strait belong to one big family.”

  Only a small number of Chinese travel agencies are allowed to organize overseas tours and they employ an “all-in-one” mode of operation.

  The tide of Chinese tourists to Taiwan has been growing rapidly since 2008, and over the years China has developed a network of collaborating partners at the local level in Taiwan who do not want the nation’s authorities to upset Beijing in any way. The strategy has enabled China’s political tourism to penetrate and divide Taiwanese society at the grassroots level, targeting the Achilles’ heel of Taiwan’s electoral politics. Consequently, China’s “united front policy by means of tourism” has developed in the direction desired by Beijing.

  Article 2 of China’s Measures for the Administration of the Overseas Tours of Chinese Citizens (中國公民出國旅遊管理辦法) stipulates that China’s central government — the Chinese State Council — decides which nations can be visited by Chinese tourists and what kinds of tourist activities are permitted. Article 6 stipulates that the central government determines the number of people who can travel abroad, and quotas are then distributed to provinces, autonomous regions and municipalities, which control the outgoing tourism business.

  The council’s macro-control has an important purpose, which is to maintain a balance between the loss of foreign exchange through overseas travel and foreign exchange gains from incoming tourists. From this perspective, it can be understood that in the eyes of the Chinese government, allowing tourists to visit other nations and setting the number of people who can go abroad is a kind of concession made to those nations by China.

  Through this process, China has developed a control strategy whereby the concessions made to each nation are required to generate a maximum return on investment.

  These factors explain the “all-in-one” travel and business model that characterizes Chinese tourism and the political logic behind it. This explains why overseas tourism, which is a purely commercial activity in civic societies, becomes an extension of foreign policy under China’s Leninist authoritarian system. It naturally follows that tourism to Taiwan is a top priority for carrying out united front work in a commercial guise.

  Article 2 of China’s Measures for the Administration of the Travel of Mainland Residents to the Taiwan Region states: “The travel of mainland residents to Taiwan Region shall be organized by a travel agency that has been designated to engage in the tourist business of mainland residents to Taiwan, and the tourists shall come to and return from Taiwan with the whole team and carry out activities as a collective while staying in Taiwan.”

  Article 3 states that agencies that are allowed to organize tour groups to Taiwan are to be appointed by the Chinese National Tourism Administration in conjunction with related departments.

  Taiwan-bound tour operators are picked from among travel agencies that have already been designated to operate overseas tours, and that have been approved and announced as such by the Association for Tourism Exchange Across the Taiwan Straits.

  The law further states that, apart from this reserve of designated travel agencies, no other unit or individual may organize tours to Taiwan.

  This means that the business of Taiwan-bound tourism is the most forbidden of forbidden zones in China and neither foreign-invested nor Taiwan-invested agencies can engage in it. These conditions have formed a franchise in which a small number of travel agencies designated by Chinese authorities exercise an oligopoly over the business of Taiwan-bound tourism.

  There are three reasons why the Chinese government finds it necessary to maintain such an oligopoly.

  The first is a political one. The restrictive system makes it easy for the Chinese government to decide which nations can be visited by Chinese tourists, when and how to dispatch those tourists and how many people can go. The government can also decide when and how to withdraw these “tourism benefits” as a way of putting pressure on the nation in question to attain its political goals.

  The second reason is an economic one. The oligopoly allows a minority of tour group operators to control the distribution of outgoing tour groups. This creates a buyers’ market in which the operators can hold down the prices asked by the agencies that handle the tour groups in destination nations. They may even designate specific travel agencies, hotels, tour bus operators and shopping venues, forming an all-in-one operation that provides the maximum return of profit to the Chinese tour organizer.

  The third reason is a matter of social control. The “all-in-one” mode of operation is the best way of keeping Chinese who go abroad on a fixed itinerary. It makes it easier to manage the participants and avoid the need to come into contact with society in their destination.

  However, this kind of arrangement leads to a business model in which Taiwanese travel agencies engage in price-cutting by accepting low group fees or no group fees at all. They supplement their profits by taking commissions from shopping venues.

  Phoenix Tours chairman Jimmy Chang (張金明) was quoted in issue 1369 of The Journalist magazine as saying that each Chinese tourist pays about US$60 to go on a Taiwan tour, but when the Chinese tour group organizers’ share is deducted, the amount that a Taiwanese operator receives might be just US$40, and some agencies even accept business for just US$15 to US$20 per head.

  Because they do most of their shopping at only a few venues, Chinese tourists’ consumption cannot benefit ordinary shopkeepers who conduct business around tourist spots. Instead, the presence of Chinese tourists often necessitates more cleaning and trash collection while making traffic conditions worse.

  As the number of Chinese tourists rises, their presence gradually shrinks the local economic benefits from tourism in Taiwan. It is precisely for this reason that Thailand has been cracking down on these so-called “zero-dollar” group tours.

  Chinese tourism attests to how a big authoritarian economy can use the “free” market economy to gradually penetrate a smaller democratic society. What appears at first to be a mutually beneficial and voluntary commercial activity gradually paves the road to dependency. The cost that Taiwanese society would have to pay for pulling out gets higher and higher and the chances of going back to the way things were get smaller and smaller.

  Something that resembles free interchange between civic societies has a different effect in the long term as it gradually constricts Taiwanese society’s freedom to make choices about its future.

  A group of eight Taiwanese mayors, county commissioners, deputy mayors and deputy commissioners who are said to recognize the so-called “1992 consensus” recently visited China, where they met China’s Taiwan Affairs Office Minister Zhang Zhijun (張志軍) and National Committee of the Chinese People’s Political Consultative Conference Chairman Yu Zhengsheng (俞正聲). The local government leaders said they hoped that Chinese tourists would visit their areas and buy the local farm produce and other specialties.

  This development shows that China’s long-standing manipulation has succeeded to the point where the Chinese government and its collaborators in Taiwan are confident that there is no need to use market activities to conceal their now-open use of commercial tactics to carry out united-front work.

  If Taiwanese can see through the fog and realize that selling out the nation will bring very little profit, hopefully their collective belief in freedom and democracy, tempered by its interactions with China — the world’s biggest authoritarian nation — would become more mature with each passing day.

  In that case, they might go beyond the century-old spell of colonialism and the notion that Taiwanese love money, fear death and always want to save face.

  Tsai Hung-jeng is chair of National Sun Yat-sen University’s Department of Sociology.

  Translated by Julian Clegg
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